Figure 20-1
Universe Industries Has Two Divisions: the Haley Division

question 2

Multiple Choice

Figure 20-1
Universe Industries has two divisions: the Haley Division and the Comet Division. Information about a component that the Haley Division produces is as follows: $\begin{array}{lr}\text { Sales } & £ 120 \text { per unit } \\\text { Variable manufacturing costs } & £ 30 \text { per unit } \\\text { Fixed manufacturing overhead } & £ 20 \text { per unit } \\\text { Expected sales in units } & 4,000 \text { units }\end{array}$ The Haley Division can produce up to 5,000 components per year. The Comet Division needs 200 units of the component for a product it manufactures.
-Refer to Figure 20-1. The maximum transfer price that the Comet Division would be willing to pay is

• A)£120.
• B)£70.
• C)£50.
• D)£30.

Identify the effects of intercompany sales of inventory on consolidated financial statements.

Apply depreciation and amortization adjustments in consolidation for assets sold between affiliated companies.

Recognize the need to eliminate dividends paid within the group in preparing consolidated financial statements.

Understand the differences between the parent-company extension method and the entity method in consolidated financial statements.

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Definitions:

Paper Payable

A financial instrument or document that promises the payment of a specific amount of money either on demand or at a specified future date.

"On Demand"

Refers to the immediate availability or access to products, services, or financial transactions upon request.

Writing

The act of marking coherent words on a surface to communicate information, or the physical record of such words.

Negotiable

indicates that a financial instrument or document can be transferred from one party to another, often by endorsement or delivery, altering the holder in due course.